Wouldn’t it be nice…
Of course, the likelihood of winning $100,000 is minute, but it’s nice to consider what you would do with it if you were so lucky.
Most Australians say if they won lotto or inherited $100k they would invest in term deposits, high interest accounts, property or take a holiday, but only one in five Australians would put the money towards superannuation.
BT Financial Group’s Melinda Howes said it is understandable travel and holidays would be high on the list, but the reality is Australians may be disappointed when it comes time to retire.
“Actively contributing to super is one of the best ways Australians can take control of their financial futures and make sure their retirement is the one they deserve,” Ms Howes said.
“Many people currently nearing retirement are under-funded – they don’t have enough super to last their lifetime. Investing an inheritance in super in your 50s or 60s could be what makes the difference between a frugal and a comfortable standard of living in retirement.”
The BT Australian Financial Health Index revealed the most popular investment following a windfall is term deposits and/or high interest accounts with 40 per cent of Australians saying this would be where they’d place the money.
These are followed equally by investing in property or putting it towards travel or a holiday (both 34 per cent).
Although these choices are consistent with the investment bias of most Australians, making super a higher priority can have a significant impact on your retirement lifestyle. Cash, short-term savings and property are the staples for Australians. Just over 1 in 4 say they hold shares, with a similar proportion holding no investments at all.
For those Australians aged under-45, the most popular option is property investment, with over half (54 per cent) of those aged 25-34 saying they’d buy property.
“Australians are certainly comfortable investing in cash and short-term savings accounts and term deposits, but the truth is, they are unlikely to reach their superannuation goals with these investments alone.”
“Most Australians receive superannuation contributions via their employer but even a small personal contribution now can have a significant impact on their retirement nest egg,” said Ms Howes.
“Australians need to weigh up all the investment options available to them if they are in the fortunate position to receive such a windfall. Superannuation should certainly be one of these options,” Ms Howes said.
What should you do if you come into a windfall?
- Take a deep breath – Don’t rush to spend it. If an investment opportunity sounds too good to be true it probably is and if you don’t understand it don’t do it!
- Take stock – What are your debt levels? Where is your mortgage at? What is your superannuation balance? How many more years of school or university fees do you have? Are you planning any big purchases? Are your insurance levels up to date and adequate?
- Understand the implications of any investment choice – If you choose to invest in property, what are the costs? If you need the money, how easily can you get access it? What are the tax implications if you make a gain or a loss? Does the investment help your tax situation? Are there franking credits or beneficial tax thresholds?
- What if you choose to invest in your super? Be aware of the rules and limits around superannuation – whilst they are prone to change, money already invested in super is often protected from future changes. When can you access your money if you invested it in super?
- Getting help – Talk to a financial adviser who can help guide you through the information and help you weigh up the facts rather than making an emotional decision.
Melinda Howes is General Manager, Superannuation with BT Financial Group. BT Financial Group is one of Australia’s leading wealth management organisations. Their offerings include investment, superannuation and retirement income products, investment administration services, financial advice, private banking and insurance solutions across some of Australia’s most trusted and respected financial services brands.
This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs.